Correlation Between Cal-Maine Foods and Goodyear Tire

Can any of the company-specific risk be diversified away by investing in both Cal-Maine Foods and Goodyear Tire at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cal-Maine Foods and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cal Maine Foods and Goodyear Tire Rubber, you can compare the effects of market volatilities on Cal-Maine Foods and Goodyear Tire and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cal-Maine Foods with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal-Maine Foods and Goodyear Tire.

Diversification Opportunities for Cal-Maine Foods and Goodyear Tire

-0.59

Correlation Coefficient

Cal-Maine Foods  Goodyear Tire

Excellent diversification

The 3 months correlation between Cal-Maine and Goodyear is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber and Cal-Maine Foods is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cal Maine Foods are associated (or correlated) with Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of Cal-Maine Foods i.e., Cal-Maine Foods and Goodyear Tire go up and down completely randomly.

Pair Corralation between Cal-Maine Foods and Goodyear Tire

Assuming the 90 days horizon Cal Maine Foods is expected to generate 0.77 times more return on investment than Goodyear Tire. However, Cal Maine Foods is 1.29 times less risky than Goodyear Tire. It trades about 0.07 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.0 per unit of risk. If you would invest  4,504  in Cal Maine Foods on December 4, 2024 and sell it today you would earn a total of  4,122  from holding Cal Maine Foods or generate 91.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cal Maine Foods  vs.  Goodyear Tire Rubber

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cal-Maine Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Goodyear Tire Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodyear Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cal-Maine Foods and Goodyear Tire

The main advantage of trading using opposite Cal-Maine Foods and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal-Maine Foods position performs unexpectedly, Goodyear Tire can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.

The idea behind Cal Maine Foods and Goodyear Tire Rubber pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.